THE STAGE IS SET TO BEGIN reforming, modernizing, and partially privatizing Social Security this year. President Clinton desperately needs an issue that’s bigger than the sum of his scandals — a point speaker Newt Gingrich made to the House Republican caucus last week — and overhauling Social Security qualifies. Democratic senator Daniel Patrick Moynihan of New York has broken the ice for liberals, joining his Democratic colleague, Bob Kerrey of Nebraska, in proposing to use the payroll tax for personal retirement accounts that can be invested in stocks, mutual funds, and bonds. Among Republicans, Rep. Mark Sanford of South Carolina is no longer waging a lonely battle to privatize the Social Security system. He has noisy allies now, including John Kasich, chairman of the House Budget Committee. Kasich wants to devote the budget surplus to establishing a private account for every worker as a first step toward privatization.
Yet nothing may happen. Why? Moynihan says Social Security reform is a test for liberals, and not many are passing so far. “I want to go very slow on this,” says Rep. Martin Frost of Texas, the influential chairman of the Democratic Congressional Campaign Committee. “I’m very reluctant to do anything to privatize Social Security. The stock market doesn’t always go up.” The White House is content to have the issue merely discussed this year, notably at special forums around the country. On the policy choices, Clinton is conflicted. His chief of staff, Erskine Bowles, sent Moynihan a congratulatory note about his reform proposal. In fact, the White House may be ready to accept partial privatization as the price of a reform deal. But the president and his aides are apoplectic over another item in the Moynihan bill, a one-percentage-point cut in the annual cost-of-living increase for Social Security recipients.
Democratic timidity in reforming Franklin D. Roosevelt’s greatest legacy is to be expected. It’s GOP inertia that’s surprising. Republican congressional leaders want more Democrats than just Moynihan and Kerrey to endorse serious reform and thus immunize Republicans. Otherwise, they fear their party will be demagogued once again for “destroying” Social Security. In his new book, Lessons Learned the Hard Way, Gingrich writes “now is the moment” for taking on Social Security. But by this he means talking, not acting. He would create a National Commission on Retirement to conduct a “national dialogue” for a year. As for Kasich’s modest plan to use the surplus for what he calls ” personal retirement savings accounts,” Gingrich told me, “We’re really exploring it.” Kasich isn’t so sure. “Everybody is very nervous about doing anything in the area of Social Security,” he says. “Gingrich keeps dancing back and forth. I’m not sure where he’s going to come down.” Majority leader Dick Armey is even more wary of tackling the issue, Kasich adds.
It’s not only GOP leaders who are skittish; it’s most Republicans in Congress. “There’s such an aversion to doing anything between now and November,” says a Republican congressman. “The [House GOP] conference is playing four corners” — that is, it’s stalling. Gingrich is willing to schedule votes on small measures like changing a worker’s paycheck to show how much is actually paid in FICA taxes (by the worker and by the employer). “The trouble is, you can pass all these small incremental bills and still not change Social Security,” the congressman says. Paradoxically, Gingrich is also worried about being preempted on Social Security reform by Clinton and Democrats such as Moynihan. It’s not likely, but Gingrich is concerned enough to have raised this at a meeting of the GOP conference.
What’s produced this new anxiety is Moynihan’s bill. “It is a huge development,” says Sanford, the Republican crusader for reform. True, the bill contains many of the hardy perennials of liberal Social Security reform. It would boost the ceiling on wages subject to the payroll tax from $ 68,400 to $ 97,500, cut the cost-of-living adjustment, raise the retirement age to 70 (in 2065), and tax roughly 95 percent of Social Security benefits. What excites conservative reformers, however, is Moynihan’s (and Kerrey’s) plan to cut the payroll tax rate from 12.4 percent to 10.4 percent and offer workers the option of investing the 2 percent on their own. Moynihan says he couldn’t avoid at least some privatization. “That’s where the energy is [in the Social Security debate]. If you don’t acknowledge that, you shouldn’t be in the political business.” Kerrey says private investment accounts are “the solution to the rich getting richer and the poor getting poorer. You don’t do it by raising the minimum wage.” The accounts wouldn’t replace Social Security benefits in the Moynihan-Kerrey plan, only supplement them.
When Moynihan unveiled his bill on the Senate floor March 16, he was surprised by some of the praise he received. Republican whip Don Nickles of Oklahoma said he wasn’t “joining as a co-sponsor now,” but he left open that possibility. Majority leader Trent Lott extolled the Moynihan measure as ” very interesting and thoughtful. We ought to get into that.” Indeed, and there’s no time like the present.
Fred Barnes is executive editor of THE WEEKLY STANDARD.
